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Mexico and the Super PesoA Tale of Two Surprises
Jorge G. Gonzalez
Trinity University
International Business Forum
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Recent Economic and Political EventsRecent Economic and Political Events World economic weaknessWorld economic weakness Mexican government gridlockMexican government gridlock Mexico – U.S. relationshipMexico – U.S. relationship Iraq war and aftermathIraq war and aftermath
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Mexico’s ReactionMexico’s Reaction
Peso’s debacle?Peso’s debacle?
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Exchange RateExchange RatePesos per U.S. DollarPesos per U.S. Dollar
Source: Banco de México www.banxico.org.mx
4
6
8
10
12
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
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Exchange RateExchange RatePesos per U.S. DollarPesos per U.S. Dollar
Source: Banco de México www.banxico.org.mx
4
6
8
10
12
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
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Mexico’s ReactionMexico’s Reaction
Peso’s debacle?Peso’s debacle? Capital flight?Capital flight?
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Foreign Direct InvestmentForeign Direct InvestmentBillions of DollarsBillions of Dollars
Source: Banco de México www.banxico.org.mx
2.64.8 4.4 4.4
11.09.5 9.2
12.812.0
12.815.3
25.2
13.6
0.0
5.0
10.0
15.0
20.0
25.0
1990 1992 1994 1996 1998 2000 2002
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Mexico’s ReactionMexico’s Reaction
Peso’s debacle?Peso’s debacle? Capital flight?Capital flight? Economic crisis?Economic crisis?
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Real GDPReal GDP% Change% Change
Source: Banco de México www.banxico.org.mx
4.5
-6.2
5.1 6.84.9 3.7
6.6
-0.3
0.9
-10.0
-5.0
0.0
5.0
10.0
1994 1995 1996 1997 1998 1999 2000 2001 2002
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Mexico’s ReactionMexico’s Reaction
Peso’s debacle?Peso’s debacle? Capital flight?Capital flight? Economic crisis?Economic crisis? Fiscal crisis?Fiscal crisis?
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0.2 0.0 0.0
-0.7-1.2 -1.1 -1.1
-0.7-1.2
-2.0
-1.0
0.0
1.0
1994 1995 1996 1997 1998 1999 2000 2001 2002
Government BalanceGovernment BalanceBalance / GDPBalance / GDP
Source: SHCP www.shcp.gob.mx
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Mexico’s ReactionMexico’s Reaction
Peso’s debacle?Peso’s debacle? Capital flight?Capital flight? Economic crisis?Economic crisis? Fiscal crisis?Fiscal crisis? Inflationary spiral?Inflationary spiral?
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InflationInflation
Source: Banco de México www.banxico.org.mx
7.05
51.97
27.70
15.7218.61
12.328.96
4.40 5.70
0
10
20
30
40
50
60
1994 1996 1998 2000 2002
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TermRisks
ShortStructural
Challenges
Risks and ChallengesRisks and Challenges
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Risks and ChallengesRisks and Challenges Super PesoSuper Peso
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19951997
19992001
2003
Inflation Differential vs. Inflation Differential vs. Exchange RateExchange Rate
Inflation
Exchange Rate
305
214
Source: Banco de México www.banxico.org.mx
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94 -
I95
- I
96 -
I97
- I
98 -
I99
- I
00 -
I01
- I
02 -
I03
- I
10
20
30
40
50
Merchandise TradeMerchandise TradeBillions of DollarsBillions of Dollars
Source: Banco de México www.banxico.org.mx
Imports
Exports
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Why Super Peso?Why Super Peso? Foreign investmentForeign investment Family remittancesFamily remittances
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Family RemittancesFamily RemittancesBillions of DollarsBillions of Dollars
4.2 4.9 5.6 5.96.6
8.99.8
0.0
5.0
10.0
1996 1997 1998 1999 2000 2001 2002
Source: Banco de México www.banxico.org.mx
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Super HeroesSuper Heroes
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Super PesoSuper Peso U.S. economyU.S. economy Mexican politics Mexican politics
TermRisks
Short
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ChinaChina Rule of lawRule of law Human capitalHuman capital InfrastructureInfrastructure Fiscal reformFiscal reform PovertyPoverty
Structural Challenges
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A Tale of Two Surprises?A Tale of Two Surprises? Economic stability is not a surpriseEconomic stability is not a surprise Super PesoSuper Peso June 17June 17thth, 2002, 2002
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Source: Proceso, June 23, 2002 Pg. 41
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Mexico and the Super PesoA Tale of Two Surprises
Jorge G. Gonzalez
Trinity University
International Business Forum
![Page 26: Mexico and the Super Peso A Tale of Two Surprises Jorge G. Gonzalez Trinity University International Business Forum](https://reader036.vdocuments.mx/reader036/viewer/2022081519/56649ee95503460f94bfa835/html5/thumbnails/26.jpg)
Mexico and the Super PesoA Tale of Two Surprises
International Business Forum
www.trinity.edu/jgonzal1